Correlation Between Coca Cola and Teucrium Soybean

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Teucrium Soybean at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Coca Cola and Teucrium Soybean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Coca Cola and Teucrium Soybean, you can compare the effects of market volatilities on Coca Cola and Teucrium Soybean and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Coca Cola with a short position of Teucrium Soybean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Teucrium Soybean.

Diversification Opportunities for Coca Cola and Teucrium Soybean

0.25

Correlation Coefficient

Coca Cola  Teucrium Soybean

Modest diversification

The 3 months correlation between Coca and Teucrium is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Teucrium Soybean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Soybean and Coca Cola is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Coca Cola are associated (or correlated) with Teucrium Soybean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Soybean has no effect on the direction of Coca Cola i.e., Coca Cola and Teucrium Soybean go up and down completely randomly.

Pair Corralation between Coca Cola and Teucrium Soybean

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 14.82 times less return on investment than Teucrium Soybean. But when comparing it to its historical volatility, The Coca Cola is 1.85 times less risky than Teucrium Soybean. It trades about 0.03 of its potential returns per unit of risk. Teucrium Soybean is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,046  in Teucrium Soybean on October 20, 2024 and sell it today you would earn a total of  135.00  from holding Teucrium Soybean or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

The Coca Cola  vs.  Teucrium Soybean

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Teucrium Soybean

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teucrium Soybean are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Teucrium Soybean is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and Teucrium Soybean

The main advantage of trading using opposite Coca Cola and Teucrium Soybean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Teucrium Soybean can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Teucrium Soybean will offset losses from the drop in Teucrium Soybean's long position.

The idea behind The Coca Cola and Teucrium Soybean pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.